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TOPIC: Survival_on_minimum_wage
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Part 2

VABurger has a choice - either put everyone at $9 an hour (like SedBurger), or raise the $9 an hour crowd by $1.75 to pass the increase along to them, putting them at $10.75 an hour. If they go with the former, employee wages go up by 10.8% to $1.56 per burger, bringing employee-related costs up to $1.76, and the cost per burger up to $2.11. So VA can still make $78,000 a year, which he might choose to do. Now he can out-price SedBurger and win market share, selling more burgers. If they go with the latter, employee wages go up by 21.5%, bringing the cost of a burger to $2.31 per burger, the same as Sed. So I can either raise my prices like her, or eat the money. At the very least, however, I have some flexibility in what I can do, and I can at least for a short time beat Sed in the market by letting everyone sit at $9.

So OutdoorBurger has kind of the same choices as VABurger, but has ever more flexibility. OutdoorBurger could simply do nothing, and continue to make $1 per burger, keeping the $100,000 income. Of course since the price of SedBurgers and VABurgers probably went up, OutdoorBurger's premium product now seems even more attractive, and Outdoor has a major advantage here - he can keep prices where they are and still beat the tar out of his competitors, and perhaps even do better, since the premium in price has been reduced. If Outdoor chooses to bump his pay scales by $1.75 without raising prices, his cost of making a burger goes from $3 to $3.26, and he still makes $74k a year on 100,000 burgers.

So to keep their incomes at $100,000 a year without doing more than required by law, Sed has to raise her price 31 cents (12.4%), while VA has to raise his by 4.4%, and Outdoor has to do nothing.

OutdoorBurger has been placed at a major advantage by this, particularly over SedBurger. If one of them goes out of business over this, it'll be SedBurger for sure.

This has played out in recent years particularly with certain chains that tend to pay a little higher such as Chick-Fil-A which has been succeeding without much in the way of price increases, reducing the spread in price between them and their competitors, and driving more business their way.

So ultimately the jobs most seriously threatened by minimum wage increases are those which the minimum wage increase is purported to help.

Windermere FL
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Part 1

To some extent, that is true. However, that's only true insofar as that all similar businesses have similar wage, cost and profit structures.

Three businesses: SedBurger, VABurger, and OutdoorBurger (which is probably the best name). For simplicity's sake, we'll have just one product. RobertBurger went out of business years ago for reasons we will not discuss here.

SedBurger pays their employees minimum wage ($7.25) across the board. It costs them $2 to make a Sedburger that they sell for $2.50. Employee-related costs (wages, benefits etc) make up $1.50 of the $2, of which $1.30 is wages. Sed nets $100,000 a year from her restaurant by selling 200,000 SedBurgers a year.

VABurger pays their employees minimum to start but gradually raises them through merit and experience, although he never pays all THAT much - after a couple of years you might be making $9 an hour. To make it easy, we'll have just two kinds of employees - $7.25 (50%) and $9 (50%). It costs them $2 to make a VABurger that they sell for $2.50. Employee-related costs make up $1.65 of the $2 of which $1.45 is wages. VA nets $100,000 a year from his restaurant by selling 200,000 VABurgers.

OutdoorBurger is a bit more of a premium product and pays their employees on a somewhat higher scale. To make it easy, let's assume it works sorta like VABurger but the two tiers are $9 to start and $12 for more experienced staff. It costs them $3 to make them yummy OutdoorBurgers that they sell for $4 (because they're better). Employee-related costs make up $2.10 of the $3, of which $1.80 is wages. Outdoor nets $100,000 a year from his restaurant by selling 100,000 OutdoorBurgers.

Tomorrow, the minimum wage goes to $9 (a 124% increase). This creates the following realities:

SedBurger pays their employees exactly minimum wage ($9). Wages now cost $1.61 per burger, and the employee costs now are $1.81 per burger. The cost per burger is now $2.31. If the price stays at $2.50, those 200,000 Sedburgers only will make Sed $38,000. So she'll either have to eat it, or raise the price of the burger to $2.81 to continue to make the same profit margin on 200,000 burgers (assuming she'll still sell 200,000 at their increased price).

Windermere FL
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If you have a fast food business, and you have to give everyone a raise, you raise the price of your product. Because everyone else has to do the same, their prices also increase. No one gains a competitive advantage. Everyone has to pay a bit more to eat the fast food.

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That part baffles me.

You mandate health insurance coverage, for instance. Any idiot should have been able to predict that companies would simply shuffle people and jobs around to avoid having to eat the cost. Money just doesn't spring up out of the ground.

Windermere FL
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What those who demand a raise to the minimum wage don't understand is this.

The owner of a small business is not going to take the hit. If the small business owner finds an increase to minimum wage challenging, he will either fire some of those earners and consolidate their work, or cut the hours of said employees.

Why is it so difficult for people to understand?

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Vab. What ever you are paying him Robert would say it is not enough.

Berryville VA
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Robert would probably love to know how much I'm paying the guy who's painting the inside of my house right now. He didn't go to college, but runs his own small painting company. He's about 25 and has a wife and a 2 year old.

Windermere FL
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Sit, Stay, roll over.

Pittsburgh PA
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You are plain wrong, Robert. I have a nostalgic and rose-colored view of the past, but having experienced the advances of the forty years I can confidently say that you have more information, convenience, travel opportunity and entertainment at your disposal than any ancestor could ever have imagined. Your doom and gloom attitudes are self-fulfilling.

Moncton Nothing
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Mari:

I could go line for line as to why your claims are bullshit... But you would stop reading.

Most of what you wrote was what the pre WWII society gave your generation and my parents generation. It was their sacrifices that gave you it and half of it has been squandered or destroyed by your generation... and what hasn't, you still seek to destroy with more budget cuts and more cuts in general.

No, you gave us nothing, you have been for the last 30 plus years suckling the last bit of the wealth that your grandparents made for this nation and both you and your parents pissed away with useless wars and proxy wars which only prove that we couldn't have won vrs the Soviets or the Chinese.

So that is why we fight 5th and lower ranked military forces.

Hazle Township PA
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TOPIC: Survival on minimum wage
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